<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
STRUCTURAL DYNAMICS RESEARCH CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
$125
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
STRUCTURAL DYNAMICS RESEARCH CORPORATION
2000 EASTMAN DRIVE
MILFORD, OHIO 45150
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 18, 1995
TO THE SHAREHOLDERS OF STRUCTURAL DYNAMICS RESEARCH CORPORATION:
You are cordially invited to attend the Annual Meeting of the Shareholders
of Structural Dynamics Research Corporation to be held on April 18, 1995 at 2:00
P.M. at The Westin Hotel, Fifth and Vine Streets, Cincinnati, Ohio 45202, for
the purpose of considering and acting on the following:
1. Election of four Class II directors to serve until the 1997 Annual
Meeting.
2. Approval of the appointment of Price Waterhouse LLP as the independent
auditors of the Company for 1995.
3. Transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on March 6, 1995 will be
entitled to vote at the meeting.
By Order of the Board of Directors
[SIGNATURE]
John A. Mongelluzzo
Secretary
March 20, 1995
IMPORTANT
A PROXY STATEMENT AND PROXY ARE SUBMITTED HEREWITH. AS A SHAREHOLDER, YOU
ARE URGED TO COMPLETE AND MAIL THE PROXY PROMPTLY WHETHER OR NOT YOU PLAN TO
ATTEND THIS ANNUAL MEETING IN PERSON. THE ENCLOSED ENVELOPE FOR RETURN OF PROXY
REQUIRES NO POSTAGE IF MAILED IN THE U.S.A. SHAREHOLDERS ATTENDING THE MEETING
MAY PERSONALLY VOTE ON ALL MATTERS WHICH ARE CONSIDERED IN WHICH EVENT THEIR
SIGNED PROXIES ARE REVOKED. IT IS IMPORTANT THAT YOUR SHARES BE VOTED. IN ORDER
TO AVOID THE ADDITIONAL EXPENSE TO THE COMPANY OF FURTHER SOLICITATION, WE ASK
YOUR COOPERATION IN MAILING YOUR PROXY PROMPTLY.
<PAGE>
STRUCTURAL DYNAMICS RESEARCH CORPORATION
2000 EASTMAN DRIVE
MILFORD, OHIO 45150
March 20, 1995
PROXY STATEMENT
The enclosed form of proxy is being solicited on behalf of the Board of
Directors of Structural Dynamics Research Corporation (also referred to as
"SDRC" or the "Company") for the Annual Meeting of Shareholders to be held on
April 18, 1995. Each of the 29,191,175 shares of Common Stock, without par
value, outstanding on March 6, 1995, the record date of the meeting, is entitled
to one vote on all matters coming before the meeting. Only shareholders of
record on the books of the Company at the close of business on March 6, 1995
will be entitled to vote at the meeting either in person or by proxy. The
Company has hired Morrow & Co., Inc. to assist it in soliciting proxies. This
Proxy Statement is being mailed to shareholders on or about March 20, 1995.
The shares represented by all properly executed proxies which are sent to
the Company will be voted as designated and each not designated will be voted
affirmatively. Each person granting a proxy may revoke it by giving notice to
the Company's Secretary in writing or in open meeting at any time before it is
voted. Proxies will be solicited principally by mail, but may also be solicited
by directors, officers and other regular employees of the Company who will
receive no compensation therefor in addition to their regular salaries. Brokers
and others who hold stock in trust will be asked to send proxy materials to the
beneficial owners of the stock, and the Company will reimburse them for their
expenses. The expense of soliciting proxies will be borne by the Company.
The Annual Report of the Company for the fiscal year ended December 31, 1994
is enclosed with this Proxy Statement.
ELECTION OF DIRECTORS
Four directors of Class II are to be elected to hold office until the 1997
Annual Meeting of Shareholders. It is the intention of the individuals named in
the proxy to vote for the election of only the four nominees designated for
Class II directorships. Only the maximum of four Class II directors may be
elected. The Company is not currently aware of any potential candidates who may
be nominated at or prior to the meeting, and in no event will the proxies
solicited hereby be voted for other than the four nominees designated for Class
II directorships.
The nominees, Ted H. McCourtney, John E. McDowell, James W. Nethercott and
Gilbert R. Whitaker, Jr., are currently serving as members of the Board of
Directors. While management has no reason to believe that any of the nominees
will, prior to the date of the meeting, refuse or be unable to accept the
nominations, should any nominee so refuse or become unable to accept, the
proxies will be voted for the election of such substitute nominee, if any, as
may be recommended by the Board of Directors. Nominees receiving the four
highest totals of votes cast in the election will be elected as directors.
Proxies in the form solicited hereby which are returned to the Company will be
voted in favor of the four nominees specified above unless otherwise instructed
by the shareholders. Abstentions and shares not voted by brokers and other
entities holding shares on behalf of beneficial owners will not be counted and
will have no effect on the outcome of the election.
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Information with respect to each of the four nominees is as follows:
CLASS II DIRECTORS
(TERMS EXPIRE IN 1995)
TED H. McCOURTNEY, General Partner of Venrock Associates, a New York based
venture capital firm, since 1970. Mr. McCourtney is also a director of Cellular
Communications, Inc., Cellular Communications International, Inc., Cellular
Communications of Puerto Rico, Inc., International CableTel Incorporated, SBSF,
Inc. and MedPartners, Inc. Mr. McCourtney is 56 years of age and has been a
director of the Company since 1986.
JOHN E. McDOWELL, Partner in the Cincinnati law firm of Dinsmore & Shohl and
counsel to the Company since its inception. Mr. McDowell also served as
Secretary of the Company from 1967 until 1983. Mr. McDowell is 67 years of age
and has been a director of the Company since 1967.
JAMES W. NETHERCOTT, retired Senior Vice President, chief financial officer
and a director of The Procter & Gamble Company (a diversified consumer products
manufacturer), having served in all three capacities from 1979 until his
retirement in 1991. Mr. Nethercott is also a director of The Ohio National Life
Insurance Company. Mr. Nethercott is 67 years of age and has been a director of
the Company since February, 1995.
GILBERT R. WHITAKER, JR., Provost and Executive Vice President for Academic
Affairs of the University of Michigan since September, 1990. Previously Dean and
Professor of Business Economics of the School of Business Administration of the
University of Michigan since 1979. Dr. Whitaker is also a director of Johnson
Controls, Inc., Lincoln National Corporation, and the Handleman Company. Dr.
Whitaker is 63 years of age and has been a director of the Company since 1988.
The following sets forth similar information with respect to incumbent
directors in Class I of the Board of Directors who are not nominees for election
at this Annual Meeting of Shareholders:
CLASS I DIRECTORS
(TERMS EXPIRE IN 1996)
WILLIAM P. CONLIN, Chairman of the Board of the Company since February,
1995. Before retiring in November, 1993, Mr. Conlin served as President of
CalComp, Inc., a subsidiary of Lockheed Corporation (a manufacturer and
distributor of computer graphics products), a position he held from 1983 to
1993. Mr. Conlin is also a director of Syntellect Incorporated. Mr. Conlin is 61
years of age and has been a director of the Company since 1993.
ROBERT P. HENDERSON, Chairman of the Board of Greylock Management
Corporation and also Managing Partner of Greylock Investments Limited
Partnership and Greylock Limited Partnership and a General Partner of Greylock
Ventures Limited Partnership and Greylock Capital Limited Partnership. From 1975
to 1983, Mr. Henderson was the Chief Executive Officer of ITEK Corporation (a
diversified electronics and optical manufacturer). Mr. Henderson is a trustee of
Eastern Enterprises, Inc. Mr. Henderson is also a director of Cabot Corporation
and Filene's Basement Corporation. Mr. Henderson is 63 years of age and has been
a director of the Company since 1986.
ALBERT F. PETER, President and Chief Executive Officer of the Company since
February, 1995. Mr. Peter joined the Company in 1967 and served in various
capacities until his election to the office of
2
<PAGE>
Vice President, a position he held until his retirement in December, 1991. In
November, 1994 Mr. Peter was named acting chief executive officer of the Company
and served in that position until his election as President and Chief Executive
Officer in February, 1995. Mr. Peter is 52 years of age and has been a director
of the Company since 1983.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
In the fiscal year ended December 31, 1994, the Board of Directors met on
seven occasions. Each incumbent director during the last fiscal year attended
75% or more of the aggregate of (i) the total number of meetings of the Board of
Directors (held during the period for which he has been a director) and (ii) the
total number of meetings held by all committees of the Board on which he served
(during the periods that he served).
The Company has an Audit Committee of the Board of Directors, the members of
which are not officers or employees of the Company. The Audit Committee, which
held three meetings during 1994, recommends to the entire Board of Directors the
independent auditors to be employed by the Company, consults with the
independent auditors with respect to their audit plans, reviews the independent
auditors' audit report and any management letters issued by the auditors, and
consults with the independent auditors with regard to financial reporting and
the adequacy of internal controls. The members of the Audit Committee during
1994 were Messrs. McDowell (Chairman), Henderson and Peter. Upon his appointment
as acting chief executive officer of the Company in November, 1994, Mr. Peter
left this Committee and Mr. Conlin joined the Committee.
The Company has a Compensation Committee of the Board of Directors, which
held three meetings during 1994. The Compensation Committee recommends to the
entire Board of Directors the compensation arrangements for the corporate
officers of the Company and reviews proposed changes in management organization.
The present members of the Compensation Committee are Messrs. McCourtney
(Chairman) and Conlin and Dr. Whitaker.
The Company also has a Stock Option Committee which administers its stock
option plans, the present members of which are Messrs. Conlin, Henderson,
McCourtney and Dr. Whitaker. This Committee held three meetings during 1994.
The Board of Directors established a Nominating Committee in February, 1995
and named as its members Messrs. Henderson (Chairman), Conlin and McDowell. The
function of the Nominating Committee is to periodically seek out qualified
candidates for election to the Board and to make recommendations to the whole
Board with respect to nominees. The Committee also makes recommendations as to
exercise of the Board's authority to determine the number of its members, within
the limits provided by the Company's Code of Regulations. Shareholders wishing
to communicate with the Nominating Committee concerning potential director
candidates may do so by corresponding with the Company's Secretary, John A.
Mongelluzzo, and including the name and biographical data of the individual
being suggested.
3
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, the Company's chief executive
officer, its former chief executive officer, each of the Company's other four
most highly compensated executive officers who held office as of the end of
1994, and one former executive officer for whom disclosure would have been
provided but for the fact he was not serving as an executive officer as of the
end of 1994 (the "named executives") during each of the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------
AWARDS
---------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
- - ------------------------------------- ---- --------- -------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Albert F. Peter 1994 23,864 -- 10,000 shs.(2) 22,500(3)
President and Chief Executive 1993 -- -- 10,000 shs.(2) 23,250(3)
Officer 1992 -- -- 10,000 shs.(2) 21,000(3)
Albert L. Klosterman 1994 219,333 -- 40,000 shs. 6,827(4)
Senior Vice President and 1993 207,000 -- 50,000 shs. 2,189(4)
Chief Scientist 1992 193,500 20,000 45,000 shs. 6,380(4)
Martin A. Neads 1994 153,836 -- 55,000 shs. 5,101(5)
Senior Vice President- 1993 -- -- -- --
SDRC Operations 1992 -- -- -- --
Edward P. Neenan 1994 152,667 -- 25,000 shs. 5,444(6)
Senior Vice President- 1993 145,000 -- 30,000 shs. 884(6)
Human Resources 1992 137,167 12,000 30,000 shs. 5,185(6)
Jack W. Martz 1994 144,000 -- 20,000 shs. 5,359(7)
Senior Vice President- 1993 138,000 -- 20,000 shs. 817(7)
PDM Business Development 1992 132,833 7,000 20,000 shs. 5,140(7)
Ronald J. Friedsam 1994 422,917 -- 100,000 shs. 1,202,808(8)
Former Chairman of the Board, 1993 395,833 -- 300,000 shs. 12,047(8)
President and Chief Executive 1992 347,333 90,000 350,000 shs. 8,552(8)
Officer
Ronald H. Hoffman 1994 176,231 -- 30,000 shs. 193,190(9)
Former Senior Vice President, 1993 175,000 -- 30,000 shs. 1,072(9)
Chief Financial Officer and 1992 171,500 7,000 35,000 shs. 5,436(9)
Treasurer
<FN>
- - ------------------------
(1) All amounts shown include amounts contributed by the Company pursuant to
the Company's Tax Deferred Capital Accumulation (401(k)) Plan, except in
the case of Mr. Peter and Mr. Neads who were not then eligible to
participate. Participants in the Company's 401(k) plan may elect to reduce
their salaries by 1% to 6% and to have such amount contributed to their
account in this plan. They may also make other voluntary contributions from
time to time. With respect to any fiscal year, the
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Company may elect to partially match employee contributions from its net
income. Such matching contributions may be either in cash or in shares of
the Company's Common Stock. The Company elected to make such contributions
for the years 1992 and 1994 but not 1993. The Company's contributions in
1992 and 1994 were made in the form of Common Stock. Amounts in this plan
become available for payout upon termination or retirement only.
(2) Consists of stock options granted to Mr. Peter in his capacity as a
non-employee director, pursuant to the Company's Directors'
Non-Discretionary Stock Option Plan, prior to his election as President and
Chief Executive Officer.
(3) Consists of director's fees paid to Mr. Peter in his capacity as a
non-employee director prior to his election as President and Chief
Executive Officer.
(4) Includes, for 1994, 1993 and 1992 respectively, $4,500, $0 and $4,364
representing the Company's 401(k) plan contributions, and $2,327, $2,189
and $2,016, which were term life insurance premiums paid by the Company for
insurance benefiting the named executive.
(5) Consists of contributions to the Company's executive pension plan for
United Kingdom employees.
(6) Includes, for 1994, 1993 and 1992 respectively, $4,500, $0 and $4,364
representing the Company's 401(k) plan contributions, and $944, $884 and
$821, which were term life insurance premiums paid by the Company for
insurance benefiting the named executive.
(7) Includes, for 1994, 1993 and 1992 respectively, $4,500, $0 and $4,364
representing the Company's 401(k) plan contributions, and $859, $817 and
$776, which were term life insurance premiums paid by the Company for
insurance benefiting the named executive.
(8) Includes, for 1994, a total of $1,196,000 paid to Mr. Friedsam in
connection with his resignation as Chairman of the Board, President and
Chief Executive Officer of the Company, pursuant to the applicable
provisions of his employment agreement with the Company. See "Executive
Compensation -- Employment Agreements." Also includes, for 1994, 1993 and
1992 respectively, $0, $0 and $4,364 representing the Company's 401(k) plan
contributions, and $5,308, $12,047 and $4,188, which were term life
insurance premiums paid by the Company for insurance benefiting the named
executive. Also includes, for 1994, $1,500 of director's fees paid after
Mr. Friedsam became a non-employee director.
(9) Includes, for 1994, a total of $192,000 payable to Mr. Hoffman in
connection with the cessation of his employment with the Company. See
"Executive Compensation -- Employment Agreements." Such amount is payable
in 12 monthly installments ending in November, 1995. Also includes, for
1994, 1993 and 1992 respectively, $0, $0 and $4,364 representing the
Company's 401(k) plan contributions, and $1,190, $1,072 and $1,072, which
were term life insurance premiums paid by the Company for insurance
benefiting the named executive.
</TABLE>
5
<PAGE>
STOCK OPTIONS
The following table sets forth information regarding stock options granted
to the named executives during 1994:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
% OF POTENTIAL REALIZABLE
TOTAL VALUE
OPTIONS AT ASSUMED ANNUAL
GRANTED RATES
NUMBER OF TO OF STOCK PRICE
SECURITIES EMPLOYEES APPRECIATION FOR
UNDERLYING IN EXERCISE OR OPTION TERM
OPTIONS FISCAL BASE PRICE EXPIRATION ----------------------
NAME GRANTED#(1) YEAR(2) ($/SH.) DATE 5%($) 10%($)
- - ------------------------ --------------- ------ ----------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Albert F. Peter 10,000 shs. (3) .7 % 11.125 4/26/1999 30,736 67,919
Albert L. Klosterman 40,000 shs. 3.1 % 11.125 4/26/2004 279,858 709,215
Martin A. Neads 15,000 shs. 1.2 % 11.125 4/26/2004 104,947 265,956
40,000 shs. 3.1 % 6.125 11/18/2004 154,079 390,467
Edward P. Neenan 25,000 shs. 1.9 % 11.125 4/26/2004 174,911 443,260
Jack W. Martz 20,000 shs. 1.5 % 11.125 4/26/2004 139,929 354,608
Ronald J. Friedsam 100,000 shs. 7.7 % 11.125 4/26/2004 699,645 1,773,038
Ronald H. Hoffman 30,000 shs. 2.3 % 11.125 4/26/2004 209,894 531,912
<FN>
- - ------------------------
(1) Except in the case of Mr. Peter, all such options first become exercisable
as to 33% of the shares covered after the end of the first year after the
date of grant, as to 67% of the shares covered after the end of two years,
and are exercisable in full after the end of three years. The option
exercise price is not adjustable over the 10-year term of the options
except due to stock splits and similar occurrences affecting all
outstanding stock.
(2) Excludes effect of options granted to non-employee directors under the
Company's Directors' Non-Discretionary Stock Option Plan except in the case
of Mr. Peter.
(3) Consists solely of options granted to Mr. Peter under the Company's
Directors' Non-Discretionary Stock Option Plan in his capacity as a
non-employee director prior to his election as President and Chief
Executive Officer. See "Compensation of Directors."
</TABLE>
6
<PAGE>
The following table sets forth information regarding stock options exercised
by the named executives during 1994 and the value of unexercised in-the-money
options held by the named parties as of December 31, 1994:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END # AT FY-END ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Albert F. Peter -- -- 25,000 5,000 -- --
Albert L. Klosterman -- -- 320,650 88,350 187,500 --
Martin A. Neads -- -- 63,630 81,650 -- --
Edward P. Neenan -- -- 205,600 55,000 399,300 --
Jack W. Martz -- -- 146,000 40,000 144,750 --
Ronald J. Friedsam -- -- 1,589,448 -- 24,750 --
Ronald H. Hoffman -- -- 113,350 -- -- --
</TABLE>
COMPENSATION OF DIRECTORS
During the year ended December 31, 1994, the Company's outside directors
(those directors who are not employees of the Company) were compensated for
their services as directors at the rate of $15,000 per year. In addition,
directors received $1,500 for each Board of Directors meeting and $750 for each
committee meeting they attended, and individuals who served as committee
chairmen received an additional $250 per committee meeting attended. The Company
does not additionally compensate employee directors. All directors are
reimbursed for all expenses incurred in connection with attendance at meetings
of the Board and the performance of Board duties.
In addition, outside directors receive stock options under the Structural
Dynamics Research Corporation Directors' Non-Discretionary Stock Option Plan
(the "Directors' Plan"). The Directors' Plan provides that upon their initial
election or appointment, non-employee directors are automatically issued options
to purchase 16,000 shares of the Company's Common Stock and that at every annual
organizational meeting of directors each then-serving director will receive an
additional option to purchase 10,000 shares. All options granted under the
Directors' Plan have a five year term and an exercise price equal to 100% of
fair market value of the Common Stock on the date of issuance. Options are not
exercisable at all for six months after their issuance, at which time they
become exercisable as to 50% of the shares covered. After 12 months, they become
exercisable in full until expiration.
EMPLOYMENT AGREEMENTS
RONALD J. FRIEDSAM. The Company's former Chairman, President and Chief
Executive Officer, Ronald J. Friedsam, was employed pursuant to an employment
agreement which became effective as of March 1, 1993 and was to have run through
December 31, 1996. The agreement provided for a base salary of $425,000 for 1994
and a targeted cash bonus based on performance. In addition, it contained
certain compensation arrangements to be implemented in the event of termination
of Mr. Friedsam's employment with the Company. On November 4, 1994, Mr. Friedsam
resigned his employment with the
7
<PAGE>
Company pursuant to a written agreement which provided that his resignation
would be treated as if his employment had been terminated by the Company without
cause for purposes of his employment agreement. Under the employment agreement,
Mr. Friedsam received an amount derived by multiplying the factor 2.99 by the
sum of Mr. Friedsam's salary and bonus paid in the year prior to the year of
termination. In addition, under these same circumstances, Mr. Friedsam became
entitled to require the Company to repurchase for cash stock options held by Mr.
Friedsam which were granted to him on or before April 17, 1990. The per share
repurchase price of options will be the difference between the fair market value
of a share of the Company's Common Stock on the date of notice of termination
and the option exercise price per share. On this basis, the cost to the Company
of repurchasing options as to which Mr. Friedsam has the right to require
repurchase is $9,900. To date, Mr. Friedsam has not elected to exercise such
right, which will expire on May 29, 1995 if not exercised on or before that
date. Subsequently, Mr. Friedsam resigned from the Company's Board of Directors
effective March 1, 1995.
MARTIN A. NEADS. In November, 1994, Martin A. Neads, who was then Vice
President and General Manager -- European Operations, was asked to relocate to
the Company's headquarters in the United States and to assume the position of
Senior Vice President -- SDRC Operations. The Company agreed to pay all expenses
incurred in connection with Mr. Neads' relocation from England. The Company also
agreed to pay the school tuition costs of Mr. Neads' children and to pay the
airfare for two return trips to England for his family during the first three
years of his assignment in the United States. The arrangement with Mr. Neads
also provides that, although Mr. Neads is to remain an "at will" employee of the
Company, in the event Mr. Neads is terminated by the Company for reasons other
than cause (defined as gross misconduct, theft, etc.) while he is on assignment
in the United States, he will be given a severance benefit equal to 12 months of
his annual pay (defined as base salary plus the prior year's bonus). If such
termination occurs during the first year of the assignment, then the Company
will also reimburse Mr. Neads for the reasonable expenses of his return to
England.
RONALD H. HOFFMAN. On November 4, 1994, Ronald H. Hoffman, who had been
serving as the Company's Senior Vice President, Chief Financial Officer and
Treasurer, entered into a severance arrangement with the Company pursuant to
which the Company agreed to pay him severance benefits at the rate of $16,000
per month through November 3, 1995. The Company also agreed to pay up to $10,000
for outplacement assistance.
COMPENSATION AND STOCK OPTION COMMITTEES
Executive compensation decisions other than with respect to stock options
are administered by the Compensation Committee of the Board of Directors, all
the members of which are outside directors. Stock option grants are determined
by the Stock Option Committee, which consists of all non-employee directors. The
formal reports of the Compensation Committee and the Stock Option Committee with
respect to 1994 compensation are as follows:
REPORT OF THE COMPENSATION COMMITTEE
The Company's overall compensation package for its executive officers
consists of base salary, annual performance-based bonus and annual stock option
grants. Additionally, executive officers are entitled to participate in the
Company's 401(k) plan on the same basis as all other employees. Stock option
grants are determined by the Stock Option Committee and are discussed under that
Committee's separate report.
8
<PAGE>
Base salary determinations are based on an evaluation of salary levels of
similarly situated executive officers at comparable companies nationally. For
this purpose, the Company considers the compensation structures in place at
other publicly traded companies of approximately the same size as the Company
which are also engaged in "high technology" businesses which are generally
either competitive with or complementary to the Company's business on some
level. All of the companies in this comparative group whose shares are traded on
the Nasdaq National Market are included in the Nasdaq Computer and Data
Processing Services Stocks Index. See "Executive Compensation -- Financial
Performance." The comparative group also includes certain companies whose shares
are traded on other exchanges, and are therefore not included in such index, but
are nevertheless considered to be comparable to the Company for this purpose. In
general, base salary levels are set at the levels believed by this Committee to
be sufficient to attract and retain qualified executives when considered with
the other components of the Company's compensation structure. The Company
believes that its overall compensation levels are in the lower end of the range
of such levels comparable nationally. The 1994 base salary of Mr. Friedsam, the
Company's Chairman, President and Chief Executive Officer throughout most of
1994, was the amount established in his employment agreement with the Company.
See "Executive Compensation -- Employment Agreements."
This Committee believes that a significant proportion of total cash
compensation should be subject to specific annual performance criteria.
Consequently, the bonus potential for the Company's executive officers is
intended to be a key component of the overall compensation package. At the
beginning of each year, this Committee sets a target bonus amount for executive
officers expressed as a percentage of the executive officer's base salary. The
target bonus percentage in each case is a function of the value of each
executive officer's contribution to the Company's overall performance. At the
same time, specific annual performance goals are also established for each
executive officer, including personal, departmental and overall Company goals.
The nature of these goals naturally differs depending upon each executive
officer's specific job responsibilities. Goals are both qualitative in nature,
such as quality of products and services, customer satisfaction, management
effectiveness and personnel development, and quantitative in nature, such as
revenue goals and pre-tax profit goals. Specific relative weights are not
assigned to each such performance factor, since the relative importance of each
factor varies depending upon each named executive's specific job
responsibilities. Instead, each compensation decision is made on a case by case
basis and will ultimately depend upon the subjective judgment of management
(except as regards the chief executive officer) and the Compensation Committee.
At the end of each year, the extent to which the specific goals applicable
to each executive officer were actually attained is measured. For executive
officers other than the chief executive officer, the measurement process is
performed by management, which submits the results of the measurement and its
recommendations to the Compensation Committee for its analysis. In the case of
the chief executive officer, the measurement process is performed directly by
the Compensation Committee. The actual bonus amount paid to each executive
officer is a function of overall Company performance as measured by attainment
of such factors as revenue and pre-tax profit objectives as well as the
attainment of the executive officers' individual performance goals and the
target bonus percentage. While the individual and corporate performance goals
are not assigned specific relative weights, on an overall basis, the level of
annual bonus compensation awarded to all employees, including the named
executives, is more heavily dependent upon corporate performance criteria and
goals than upon individual performance criteria and goals.
9
<PAGE>
For 1994, the target bonus for Mr. Friedsam, then the Company's Chairman of
the Board, President and Chief Executive Officer, was specified in his
employment agreement as 67% of base salary. The qualitative performance goals
included quality and timeliness of product offerings, as well as the continued
implementation and oversight of programs to improve overall managerial skills
within the Company. The specific quantitative performance goals set for Mr.
Friedsam included stated levels of earnings per share, net profit, pre-tax
profit, revenue and return on equity. The quantitative goals were identical to
the Company's overall financial objectives for 1994. Mr. Friedsam's various
personal and Company performance criteria were not assigned individual weights,
as is the case for employees generally. The Company performance goals considered
in the aggregate were more influential in determining the annual bonus.
A number of extraordinary events occurred during 1994 which profoundly
affected the Company's normal approach to compensation decisions. In September,
1994, the Company announced that an internal review of its Far East Headquarters
operations had indicated that certain shipments of SDRC products intended for
sale to or through third party distribution channels apparently did not
represent valid sales, and that as a result the Company expected to restate
certain prior period financial statements. Following this announcement, the
Company instructed its independent legal counsel to conduct an extensive
examination of the Company's worldwide business practices, beginning with the
Far East. Prior to completion of this examination, on October 26, 1994, the
Company's independent auditors resigned, citing an inability to rely upon the
representations of management. Following the formal delivery to the Board of
Directors on November 2, 1994 of the results of the Far East portion of the
examination, substantial changes in management, in particular among the named
executive officers, took place. Finally, in early 1995 the Company published
restated financial statements for the years 1991, 1992 and 1993 and for the
first two quarters of 1994 which showed substantially lower revenues and
earnings than had previously been reported for those periods. Due to the
Company's financial performance in 1994, no bonuses were paid with respect to
1994 to any of the named executives.
William P. Conlin Ted H. McCourtney Gilbert R. Whitaker, Jr.
REPORT OF THE STOCK OPTION COMMITTEE
The Stock Option Committee of the Board of Directors determines annual stock
option grants to the named executives and other eligible employees. Stock
options are intended to encourage key employees to remain employed by the
Company by providing them with a long-term interest in the Company's overall
performance as reflected by the performance in the market of the Company's
Common Stock.
Generally, the amounts of annual option grants to executive officers,
including the named executives, are based on an evaluation of option grants made
to similarly situated executive officers at comparable companies nationally.
These comparable companies are the same companies utilized by the Compensation
Committee in its salary determinations described in its report. In determining
annual option awards to the named executives and other employees, the Stock
Option Committee also considers the amounts and terms of options granted in
prior fiscal years to each of the named executives and other employees.
Except for options granted in November, 1994 to Mr. Neads in connection with
his promotion to his current position and his agreement to relocate to the
United States, awards of options to named
10
<PAGE>
executive officers for 1994 were made in April, 1994, well before the
extraordinary matters described in the report of the Compensation Committee came
to light. In the specific case of Mr. Friedsam, then the Company's Chairman of
the Board, President and Chief Executive Officer, the grant of options to him
was based on an extensive study commissioned by the Board of Directors by an
independent consulting firm which is recognized as an expert in executive
compensation matters. Such study recommended a competitive position with respect
to an amount of stock options to be granted to Mr. Friedsam over the course of
his employment contract. This position was based upon analysis by the consulting
firm of stock-based incentives and of the level of stock ownership of chief
executive officers of each of the companies included on the Forbes magazine list
of "The 200 Best Small Companies in America," of which the Company was one.
William P. Conlin Ted H. McCourtney
Robert P. Henderson Gilbert R. Whitaker, Jr.
FINANCIAL PERFORMANCE
The following graph summarizes the cumulative return on $100 invested in the
Company's Common Stock, the S&P 500 Stock Index and the Nasdaq Computer and Data
Processing Services Stocks Index over a five year period as calculated by the
Center for Research in Security Prices at the University of Chicago.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SDRC STOCK S&P 500 NASDAQ C&D
<S> <C> <C> <C>
12/29/89 100 100 100
12/31/90 172.881 96.769 106.527
12/31/91 393.22 126.452 214.7
12/31/92 149.53 136.158 231.001
12/31/93 233.898 149.224 244.589
12/30/94 72.881 151.22 297.902
</TABLE>
11
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS
Under Section 13(d) of the Securities Exchange Act of 1934 and the rules
promulgated thereunder, a beneficial owner of a security is any person who
directly or indirectly has or shares voting power or investment power over such
security. Such beneficial owner under this definition need not enjoy the
economic benefit of such securities. The following shareholders are known by the
Company to be the beneficial owners of 5% or more of the Company's Common Stock
as of December 31, 1994:
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT
CLASS BENEFICIAL OWNER OF OWNERSHIP OF CLASS
- - ------------ ----------------------------- --------------------- --------
<S> <C> <C> <C>
Common Stock State of Wisconsin Investment 2,860,000 shares 9.89%
Board owned beneficially(1)
P.O. Box 7842
Madison, WI 53707
Common Stock Government of 1,907,200 shares 6.60%
Singapore Investment owned beneficially(2)
Corporation Pte. Ltd.
250 Northbridge Road,
No. 33-00
Raffles City Tower
Singapore 0607
Common Stock FMR Corp. 1,765,100 shares 6.11%
82 Devonshire Street owned beneficially(3)
Boston, MA 02109
<FN>
- - ------------------------
(1) The information in the above table and in this footnote was obtained from a
Schedule 13G filed by such shareholder. Such shareholder has the sole power
to vote and to direct the disposition of such shares.
(2) The information in the above table and in this footnote was obtained from a
Schedule 13D filed by such shareholder. Such shareholder has the shared
power to vote and to direct the disposition of such shares.
(3) The information in the above table and in this footnote was obtained from a
Schedule 13G filed by such shareholder. Such shareholder has the sole power
to direct the disposition of all such shares and to vote 151,300 of such
shares.
</TABLE>
12
<PAGE>
MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock by its directors, the named executives, and all directors and
executive officers as a group, as of March 6, 1995:
<TABLE>
<CAPTION>
TITLE OF AMOUNT AND NATURE OF PERCENT OF
CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS(2)
- - ------------ ------------------------------------ ----------------------- ----------
<S> <C> <C> <C>
Common Stock Albert F. Peter 214,451 shs.(3) .7%
Common Stock William P. Conlin 27,000 shs.(4) .1%
Common Stock Robert P. Henderson 71,540 shs.(5) .2%
Common Stock Ted H. McCourtney 146,276 shs.(6) .5%
Common Stock John E. McDowell 98,800 shs.(7) .3%
Common Stock James W. Nethercott -- --
Common Stock Gilbert R. Whitaker, Jr. 53,000 shs.(8) .2%
Common Stock Albert L. Klosterman 617,919 shs.(9) 2.1%
Common Stock Martin A. Neads 91,980 shs.(10) .3%
Common Stock Jack W. Martz 175,947 shs.(11) .6%
Common Stock Edward P. Neenan 239,330 shs.(12) .8%
Common Stock All Directors and Executive Officers 1,803,409 shs.(13) 5.9%
as a Group (13 persons)
Common Stock Ronald J. Friedsam 906,720 shs.(14) 3.0%
Common Stock Ronald H. Hoffman 7,235 shs. --
<FN>
- - ------------------------
(1) The persons and entities named in the above table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in other footnotes to this table.
For purposes of this table, stock options are considered to be currently
exercisable if by their terms they may be exercised as of the date of
mailing of this Proxy Statement or if they become exercisable within 60
days thereafter.
(2) These percentages assume the exercise of certain currently exercisable
stock options, which options have not in fact been exercised.
(3) Includes 144,115 shares held of record by Mr. Peter; 6,000 shares held of
record by Mr. Peter as custodian for his children; 29,680 shares held of
record by Mr. Peter's wife; 4,656 shares held by Mr. Peter's wife as a
joint tenant with other members of her family; and 30,000 shares which are
issuable upon the exercise of currently exercisable, but unexercised stock
options.
(4) Includes 1,000 shares held of record or beneficially by Mr. Conlin and
26,000 shares which are issuable upon the exercise of currently
exercisable, but unexercised stock options.
(5) Includes 31,540 shares held of record by Mr. Henderson and 40,000 shares
which are issuable upon the exercise of currently exercisable, but
unexercised stock options.
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
(6) Includes 88,276 shares held of record by Mr. McCourtney; 10,000 shares held
of record by Mr. McCourtney's wife as trustee for their children; and
48,000 shares which are issuable upon the exercise of currently
exercisable, but unexercised stock options.
(7) Includes 11,600 shares held of record by Mr. McDowell; 39,200 shares held
of record by Mr. McDowell's wife (including 1,600 shares held in trust for
the benefit of their grandchildren); and 48,000 shares which are issuable
upon the exercise of currently exercisable, but unexercised stock options.
(8) Includes 5,000 shares held of record by Dr. Whitaker and 48,000 shares
which are issuable upon the exercise of currently exercisable, but
unexercised stock options.
(9) Includes 252,219 shares held of record or beneficially by Dr. Klosterman
and 365,700 shares which are issuable upon the exercise of currently
exercisable, but unexercised stock options.
(10) Includes 5,000 shares held of record by Mr. Neads and 86,980 shares which
are issuable upon the exercise of currently exercisable, but unexercised
stock options.
(11) Includes 4,735 shares held of record or beneficially by Mr. Martz; 2,012
shares held of record by Mr. Martz's wife; 3,200 shares held of record by
Mr. Martz as custodian for his children; and 166,000 shares which are
issuable upon the exercise of currently exercisable, but unexercised stock
options.
(12) Includes 5,380 shares held of record or beneficially by Mr. Neenan and
233,950 shares which are issuable upon the exercise of currently
exercisable, but unexercised stock options.
(13) Includes a total of 1,157,160 shares which are issuable upon the exercise
of currently exercisable, but unexercised stock options.
(14) Includes 250,772 shares held of record or beneficially by Mr. Friedsam and
655,948 shares which are issuable upon the exercise of currently
exercisable, but unexercised stock options. Mr. Friedsam has the right,
exercisable until May 29, 1995, to require the Company to purchase such
stock options from him for $9,900. See "Executive Compensation --
Employment Agreements."
</TABLE>
ELECTION OF AUDITORS
The accounting firm of Price Waterhouse LLP is presently serving as the
Company's independent accounting firm as recommended by the Audit Committee.
Price Waterhouse LLP also served as the Company's independent auditors with
respect to the Company's financial statements for the fiscal year ended December
31, 1994. Representatives of Price Waterhouse LLP are expected to be present at
the Annual Meeting. They will have an opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions. The
affirmative vote of a majority of the Company's Common Stock present in person
or by proxy at the Annual Meeting and entitled to vote is required to adopt the
resolution. Action by shareholders is not required by law in the appointment of
independent auditors, but their appointment is submitted by the Board of
Directors in order to give the shareholders a voice in the selection of
auditors. If the resolution is rejected by the shareholders, the Board of
Directors will reconsider its choice of Price Waterhouse LLP as the Company's
independent auditors. Proxies in the form solicited hereby which are returned to
the Company will be voted in favor of the resolution unless otherwise instructed
by the shareholders. Abstentions will have the same effect as votes cast
14
<PAGE>
against the resolution, provided such shares are properly present at the meeting
in person or by proxy. Shares not voted by brokers and other entities holding
shares on behalf of beneficial owners will have no effect on the outcome of the
proposal. The Board of Directors recommends the adoption of the resolution.
The resolution states:
RESOLVED, that this Company retains Price Waterhouse LLP as the
independent auditors of the Company for 1995.
RESIGNATION OF FORMER AUDITORS
Prior to October 26, 1994, KPMG Peat Marwick LLP ("KPMG") was the Company's
principal independent accounting firm. On that date KPMG resigned such position.
Prior to its resignation, KPMG had been engaged to audit the Company's financial
statements since 1982. Neither of KPMG's reports on the Company's financial
statements for each of the past two years as of the time of the resignation
(1993 and 1992) contained an adverse opinion or a disclaimer of opinion, or were
qualified or modified as to uncertainty, audit scope or accounting principles.
In its letter of resignation dated October 26, 1994, KPMG advised the
Company that matters had come to its attention which raised serious questions as
to its ability to rely on management's representations. Furthermore, in its
letter, KPMG stated that these matters resulted in a loss of confidence by KPMG
in representations made to it by management and impaired its ability to conduct
an examination in accordance with generally accepted auditing standards. In
addition, KPMG advised the Company that information had come to its attention
that it concluded materially impacted the fairness or reliability of previously
issued audit reports on consolidated financial statements; due to KPMG's
resignation, the issue was not resolved to KPMG's satisfaction prior to its
resignation. Specifically, KPMG advised the Company that its auditors' reports
on the consolidated financial statements of the Company for the years ended
December 31, 1991, December 31, 1992 and December 31, 1993 should no longer be
relied upon. Such letter may be deemed to express a disagreement
("disagreement") between KPMG and the Company within the meaning of Item 304(a)
of Regulation S-K promulgated by the Securities and Exchange Commission.
In its Current Report on Form 8-K first disclosing KPMG's resignation, the
Company stated that during its two most recent fiscal years (and the subsequent
interim period preceding October 26, 1994), there were no disagreements between
the Company and KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of KPMG, would have caused it
to make reference to the subject matter of such disagreements in connection with
its reports. In a letter dated November 10, 1994, KPMG stated that it had read
the Company's Form 8-K and agreed with the statements contained therein except
the statement that there were no disagreements on any matter of accounting
principles or practices. The KPMG letter then stated that "On October 7, 1992,
in connection with our timely review of the Form 10-Q for the quarter ended
September 30, 1992, we informed Structural Dynamics Research Corporation that if
it did not reverse revenue that it had recognized during the quarter ended
September 30, 1992 relating to a certain transaction with Hewlett Packard that
we would inform the audit committee of Structural Dynamics Research Corporation
that we believed that that material transaction had been accounted for in a
manner that was inconsistent with generally accepted accounting principles. The
accounting for that transaction ultimately was resolved to our satisfaction."
The Company subsequently filed a copy of
15
<PAGE>
KPMG's November 10, 1994 letter as an exhibit to the Form 8-K and further
reported that it agreed with the facts described in the letter but that, because
the matter had been resolved to KPMG's satisfaction, SDRC had not, at the time
it originally filed the Form 8-K, considered the matter to have constituted a
disagreement within the meaning of Item 304 of Regulation S-K.
Following the resignation of KPMG, the Company engaged Price Waterhouse LLP
to serve as its principal independent accounting firm. The Company had not
consulted with Price Waterhouse LLP regarding any matter during the years 1992
and 1993 or during the interim period in 1994 prior to KPMG's resignation.
1996 SHAREHOLDER PROPOSALS
In order for any shareholder proposals for the 1996 Annual Meeting of
Shareholders to be eligible for inclusion at the meeting, they must be received
by the Secretary of the Company at 2000 Eastman Drive, Milford, Ohio 45150,
prior to November 21, 1995.
OTHER MATTERS
The Company has retained Morrow & Co., Inc., a professional solicitation
firm, to assist in soliciting proxies for a fee estimated at $12,500. Morrow &
Co., Inc. will use approximately 30 people to solicit proxies on behalf of the
Company.
The Board of Directors does not know of any other business to be presented
to the meeting and does not intend to bring other matters before the meeting.
However, if other matters properly come before the meeting, it is intended that
the persons named in the accompanying proxy will vote thereon according to their
best judgment in the interests of the Company.
By Order of the Board of Directors
[SIGNATURE]
John A. Mongelluzzo
Secretary
16
<PAGE>
[LOGO]
-------------------------------------------
NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
----------------------------
1995
ANNUAL MEETING
OF SHAREHOLDERS
APRIL 18, 1995
<PAGE>
PROXY STRUCTURAL DYNAMICS RESEARCH CORPORATION
2000 Eastman Drive
Milford, Ohio 45150
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Albert F. Peter, John A. Mongelluzzo and
Jeffrey J. Vorholt, and each of them, with full power of substitution, as
proxies to vote, as designated below, for and in the name of the undersigned all
shares of stock of Structural Dynamics Research Corporation which the
undersigned is entitled to vote at the Annual Meeting of the Shareholders of
said Company scheduled to be held on April 18, 1995 at 2:00 P.M. at The Westin
Hotel, Fifth and Vine Streets, Cincinnati, Ohio 45202 or at any adjournment or
recess thereof.
Please mark X in the appropriate box. The Board of Directors recommends a
FOR vote on each proposal.
1. ELECTION OF CLASS II DIRECTORS.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below)
TED H. McCOURTNEY, JOHN E. McDOWELL, JAMES W. NETHERCOTT, GILBERT R.
WHITAKER, JR.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name on the space provided below)
____________________________________________________________________________
2. APPROVAL of the appointment of Price Waterhouse LLP as the independent
auditors of the Company for 1995.
/ / FOR / / ABSTAIN / / AGAINST
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
<PAGE>
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR the election of Directors and FOR the proposal in paragraph 2.
ALL FORMER PROXIES ARE HEREBY REVOKED.
NUMBER OF SHARES ____________
_____________________________
(Signature of Shareholder)
_____________________________
(Signature of Shareholder)
(Please sign exactly as your
name appears hereon. All
joint owners should sign.
When signing in a fiduciary
capacity or as a corporate
officer, please give your
full title as such.)
Dated: _______________ , 1995
